Guest Column | July 9, 2018

Software Providers: It's Time To Pay Attention To The Channel

By Kymberly Robinson, CoreDial

NCOIC Multi-Cloud Computing

If there’s one thing that most software vendors have shown proficiency in, it’s the ability to market features and functionality. The technology industry has been historically successful for converting far-flung acronyms, buzz words, and abstract technology concepts into revenue. The ascent of innovations in business tools demonstrate that when vendors put their collective minds to it, and can demonstrate profound benefits to end users, the market usually responds.

Today, the cycle of innovation continues, and the next wave of technology promises even more benefits for customers. But it also represents much more complexity for the channel partners who are charged with marketing, selling, implementing, and supporting these solutions. The more disruptive technology categories include omnichannel services, the Internet of Things (IoT), and even AI, each of which can deliver transformative capabilities to the customer base. There are also more amorphous concepts — like “digital transformation” and “customer engagement” — that vendors have identified as addressable targets for delivering even more innovation.

While some vendors indeed offer solid products and suites that may qualify as viable solutions under these more nebulous banners, there are also those providers that deliver only a subset of capabilities that serve evolving customer needs. This presents a significant challenge for both the solution provider and end-customer, since no one seems to be clear on the definition of these emerging categories. In almost every case, regardless of the maturity of the product portfolio, vendors leave it to their channel partners to do the heavy lifting in interpreting the applicability of these offerings to the business customer. These vendors also rely on managed services providers and resellers in the channel to sell, deploy, and support these products and services in a highly competitive, increasingly fragmented, and in many cases, commoditized marketplace. This situation is causing havoc in the channel, and if not addressed properly, software vendors risk alienating their reseller partners.

Downward Pressure

Channel partners now find themselves in the peculiar and uneasy position in trying to remain accountable to both software vendors and customers. The demands they face have never been greater. They are tasked with training their sales and support teams on new solutions, carrying inventory, and implementing marketing initiatives to encourage a confused — and even hesitant — customer base. Partners face pressure to implement innovations that may shortly be eclipsed by even newer features. While this in itself is a burden on the solution provider’s resources, these VARs face an even bigger struggle in achieving profitability in this environment.

Today’s uber-competitive marketplace — propelled by the never-ending technology refresh and a rapidly consolidating industry — has caused cataclysmic change for channel partners. They face a landscape where many large providers are now in full acquisition mode, placing an aura of uncertainty on the channel. Already, a wave of partners see the writing on the wall in terms of their existing vendor relationships, and now are pursuing new opportunities that will, at the very least, offer a path to diversification — and survival.

Other important factors include the industry’s transition from CAPEX to OPEX sales models. In numerous instances, the change to hosted models like UCaaS for example, coupled with more commoditized technology, have resulted in dramatically decreased margins. In fact, many channels now struggle to reach 15 or 20 percent on pure unified communications deployments. The ability to sell additional services, like ongoing technical support, can spike these figures a bit, but these are usually offset by the higher sales costs associated with new technology.

Instead of continuing to drain the partner network, the time has come for the vendor community to recognize the enormous burden it has placed on its reseller partners, and to re-evaluate the efficiency, relevance — and yes, the fairness — of the channel programs they run.

Pain Points

There’s no doubt that channel partners are quite happy to sell new technology. They embrace innovation, and are eager to leverage new solutions as a vehicle to pursue new business and strengthen relationships with existing customers. What they don’t like, however, is the tight grip many vendors hold in terms of bundling subscription models, and the administrative minefield dealers need to navigate. The concern becomes most prevalent during the sales and implementation processes, particularly as they relate to software licenses, add-ons, and billing and invoicing procedures.

Consider that in most deployments, licensing varies greatly according to the services and features a customer wants, the number of seats in the deployment, any custom development work that is needed, and the length of the business relationship. Many license models are highly restrictive in giving the partner the latitude they need to make an implementation profitable. Often times, a reseller can close a deal by creating a bundle that satisfies a pricing issue or matches a competitive offer, but is then hamstrung if a vendor elects to adhere to an inflexible price list. In addition, delivering new features and updates can in some instances be cumbersome. And the invoicing process, including the proper tax calculations for multiple jurisdictions, can turn into a soul-crushing exercise for the partner.

Foundations For Success

If the industry is to continue to grow, a greater emphasis must be placed on delivering value to the partner network. Gone are the days when technology was the sole factor for partners evaluating vendor relationships. Today’s reseller needs much more than innovation. Strong margins, flexible business models and pricing, and intuitive administrative tools are becoming the building blocks for long-lasting, fruitful channel partnerships.

Software vendors must realize that their success is inextricably linked to the success of their partners in the channel. Operations must be simplified. Support must be consistent and relevant to market demands. Force-feeding technology into the channel without giving partners the flexibility to sell innovations in a manner that is palatable for the end-customer is not a sustainable long-term strategy. It’s evident that the old way of managing the channel has run its course. The time has come to usher in a new approach that gives partners the opportunity to fully participate in this next wave of innovation.

About CoreDial

CoreDial offers a leading UCaaS platform and business model focused on driving channel success and empowering 800+ partners to deliver cloud communications solutions, serving more 23,000 businesses and 300,000 seats nationwide.